Ligand Reports Second Quarter 2018 Financial Results

SAN DIEGO--(BUSINESS WIRE)--
Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported
financial results for the three and six months ended June 30, 2018, and
provided an operating forecast and program updates. Ligand management
will host a conference call today beginning at 4:30 p.m. Eastern time to
discuss this announcement and answer questions.

“The second quarter was punctuated by major positive corporate events
that are driving our financial success and highlighting the potential of
our business model. Our OmniAb business is flourishing. We continue to
enter new OmniAb drug research contracts, there are now a record number
of OmniAb programs in clinical trials and we entered a $47 million
amendment with WuXi to grant it additional flexibility to pursue more
antibody-based deals while preserving our royalty economics. Our two
lead partnered financial assets, Promacta and Kyprolis, hit all-time
revenue highs in the second quarter, putting both drugs squarely on
course to exceed $1 billion in revenue in 2018. As well, we saw a flurry
of other positive news from partners and an expanding calendar of
expected clinical, regulatory or business events including from partners
such as Sage, Viking, Seelos, Immunovant and others,” said John Higgins,
Chief Executive Officer of Ligand. “The Ligand business model is
delivering significant and positive results that match our expectations
for the company. We are very pleased with Ligand’s performance.”

Second Quarter 2018 Financial Results

Total revenues for the second quarter of 2018 were $90.0 million,
compared with $28.0 million for the same period in 2017. Royalties were
$31.4 million, compared with $14.2 million for the second quarter of
2017 and $21.9 million for the third quarter of 2017. Under the new
accounting standard ASC 606, adopted as of the start of 2018, second
quarter 2018 royalties should be compared with third quarter 2017
royalties due to the timing of revenue recognition. Second quarter 2018
royalties primarily consisted of royalties from Promacta, Kyprolis and
EVOMELA®. Material sales were $7.6 million, compared with
$5.6 million for the same period in 2017 due to the timing of Captisol®
purchases for use in clinical trials and commercial products. License
fees, milestones and other revenues were $51.0 million, compared with
$8.2 million for the same period in 2017, primarily due to the receipt
of a $47 million payment from WuXi Biologics to amend its OmniAb
platform license agreement.

Cost of goods sold was $1.1 million for the second quarter of 2018,
compared with $0.9 million for the same period in 2017. Amortization of
intangibles was $3.3 million, compared with $2.7 million for the same
period in 2017. Research and development expense was $6.1 million,
compared with $4.8 million for the same period of 2017. General and
administrative expense was $9.3 million, compared with $6.5 million for
the same period in 2017.

GAAP net income for the second quarter of 2018 was $73.2 million, or
$2.99 per diluted share, compared with $6.1 million, or $0.26 per
diluted share, for the same period in 2017. Adjusted net income for the
second quarter of 2018 was $60.6 million, or $2.59 per diluted share,
compared with $14.9 million, or $0.67 per diluted share, for the same
period in 2017.

As of June 30, 2018, Ligand had cash, cash equivalents and short-term
investments of $956.9 million. Cash generated from operations during the
2018 second quarter was $73.6 million.

Year-to-Date Financial Results

Total revenues for the six months ended June 30, 2018 were $146.2
million, compared with $57.3 million for the same period in 2017.
Royalties were $52.2 million, compared with $38.4 million for the six
months ended June 30, 2017 and $36.1 million for the six months ended
September 30, 2017. Under ASC 606, royalties for the six months ended
June 30, 2018 should be compared with royalties for the six months ended
September 30, 2017 due to the timing of revenue recognition. Royalties
for the six months ended June 30, 2018 primarily consisted of royalties
from Promacta, Kyprolis and EVOMELA. Material sales were $12.0 million,
compared with $6.7 million for the same period in 2017 due to the timing
of Captisol purchases for use in clinical trials and commercial
products. License fees, milestones and other revenues were $82.0
million, compared with $12.2 million for the same period in 2017,
primarily due to the receipt of a $47 million payment from WuXi
Biologics to amend its OmniAb platform license agreement and due to the
receipt of a $20 million upfront payment upon the licensing of Ligand’s
GRA program.

Cost of goods sold was $1.9 million for the six months ended June 30,
2018, compared with $1.2 million for the same period in 2017 due to the
timing and mix of Captisol sales. Amortization of intangibles was $6.6
million, compared with $5.4 million for the same period in 2017.
Research and development expense was $13.5 million in both periods.
General and administrative expense was $16.9 million, compared with
$13.9 million for the same period in 2017.

GAAP net income for the six months ended June 30, 2018 was $118.4
million, or $4.81 per diluted share, compared with $11.1 million, or
$0.48 per diluted share, for the same period in 2017. The six months
ended June 30, 2018 income was impacted by a one-time, non-cash gain due
to a change in the accounting for Ligand’s investment in Viking
Therapeutics, which resulted in marking the investment to market.
Adjusted net income for the six months ended June 30, 2018 was $96.2
million, or $4.14 per diluted share, compared with $27.6 million, or
$1.25 per diluted share, for the same period in 2017.

2018 Financial Guidance

Ligand is updating its previous guidance for 2018 revenue to be
approximately $232 million, including royalties of approximately $120
million, material sales of approximately $23 million and license fees
and milestones of approximately $89 million, with the potential for up
to an additional $8 million in license fees and milestones. Ligand notes
that with revenue of $232 million, adjusted earnings per diluted share
would be approximately $6.30.

This compares with previous guidance for 2018 revenue to be
approximately $226 million, including royalties of approximately $116
million, material sales of approximately $23 million and license fees
and milestones of approximately $87 million, with the potential for up
to an additional $10 million in license fees and milestones and adjusted
earnings per diluted share of approximately $6.15.

Second Quarter 2018 and Recent Business Highlights

Promacta®/Revolade®

Novartis reported second quarter 2018 net sales of Promacta/Revolade
(eltrombopag) of $292 million, an $82 million or 39% increase over the
same period in 2017.

Novartis announced that the FDA has accepted the company's
supplemental New Drug Application (sNDA) and granted Priority Review
designation to Promacta in combination with standard immunosuppressive
therapy for first-line treatment of severe aplastic anemia.

Novartis published the results of a survey uncovering the real-world
impact of immune thrombocytopenia on patient quality of life.

Kyprolis® (carfilzomib), an
Amgen Product Utilizing Captisol

On July 26, 2018, Amgen reported second quarter net sales of Kyprolis
of $263 million, a $52 million or 25% increase over the same period in
2017. On August 1, 2018, Ono Pharmaceutical Company reported Kyprolis
sales in Japan of approximately $11.6 million for the most recent
quarter.

On June 11, 2018, Amgen announced that the FDA approved the sNDA to
add the positive overall survival (OS) data from the Phase 3 ASPIRE
trial to the U.S. Prescribing Information for Kyprolis.

On April 30, 2018, Amgen announced that the CHMP adopted a positive
opinion recommending a label variation for Kyprolis in the European
Union to include the final OS data from the Phase 3 ASPIRE trial.

Sage Therapeutics announced that the FDA accepted the filing of a New
Drug Application (NDA) for IV-brexanolone for the treatment of
postpartum depression, and that the NDA was granted Priority Review
status and a Prescription Drug User Fee Act (PDUFA) target date of
December 19, 2018.

Retrophin announced first patient enrollment in the Phase 3 DUPLEX
Study evaluating the long-term nephroprotective potential of
sparsentan for the treatment of focal segmental glomerulosclerosis.
Topline data from the 36-week interim efficacy endpoint are expected
in the second half of 2020.

Retrophin announced that the United States Patent and Trademark Office
issued a new patent providing coverage for the use of sparsentan in
the treatment of IgAN and broadening the existing coverage to include
all doses of sparsentan between 200 and 800 mg/day. The patent has a
stated expiration date of March 30, 2030.

CASI Pharmaceuticals announced that preparations for the EVOMELA
commercial launch in China were underway, and that CASI expects formal
regulatory application feedback from China’s State Drug Administration.

Viking Therapeutics announced that enrollment had been completed in
the company’s Phase 2 trial of VK2809 in patients with primary
hypercholesterolemia and non-alcoholic fatty liver disease, and that
trial results are expected in the second half of 2018.

Viking Therapeutics also announced that the results from the company’s
Phase 2 study of VK5211 in patients recovering from hip fracture have
been selected for presentation at the American Society for Bone and
Mineral Research 2018 annual meeting.

Melinta Therapeutics announced oral presentations and posters for
Baxdela at the American Society for Microbiology’s annual ASM Microbe
2018 meeting.

Opthea Limited announced that its Phase 1b trial of OPT-302 in
Diabetic Macular Edema (DME) met its primary objective and that the
company had dosed the first patient in a Phase 2a randomized,
controlled clinical trial evaluating OPT-302 in patients with
persistent center-involved DME.

Opthea Limited announced it reached the mid-way point of patient
recruitment for its Phase 2b clinical trial of OPT-302 in wet
age-related macular degeneration and plans to report primary data from
the study in early 2020.

Merrimack Pharmaceuticals announced a poster presentation related to
seribantumab at the 2018 American Society of Clinical Oncology (ASCO)
Annual Meeting.

Seelos Therapeutics announced a merger agreement with Apricus
Biosciences, to form a combined publicly-traded company focused on
developing a portfolio that includes Ligand-partnered CNS programs.

Aldeyra Therapeutics announced enrollment of the first patient in a
Phase 3 clinical trial of topical ocular reproxalap for the treatment
of allergic conjunctivitis.

Aldeyra Therapeutics also announced that the last patient has been
dosed in a Phase 2b clinical trial of topical ocular reproxalap in dry
eye disease.

Aptevo Therapeutics announced that it had submitted an Investigational
New Drug (IND) application to the FDA to evaluate APVO436 in a Phase 1
clinical study for the treatment of patients with relapsed or
refractory acute myeloid leukemia or myelodysplastic syndrome.

Aptevo Therapeutics presented new data for APVO436 at the American
Association for Cancer Research (AACR) 2018 Annual Meeting.

Arcus Biosciences announced that the FDA cleared the IND application
for OmniAb-derived AB122 and the company presented a poster on AB122
at the AACR 2018 Annual Meeting.

Arcus Biosciences also announced a collaboration agreement with
Infinity Pharmaceuticals to evaluate AB122 with IPI-549, an
immuno-oncology candidate that selectively inhibits PI3K-gamma.

CStone Pharmaceuticals announced two pivotal Phase 2 studies exploring
the efficacy and safety of OmniAb-derived CS1001 in patients with
natural killer cell/T-cell lymphoma and classical Hodgkin's lymphoma
have been initiated and have each enrolled and dosed the first patient.

CStone Pharmaceuticals announced a collaboration agreement with
Blueprint Medicines to initiate a proof-of-concept clinical trial in
China evaluating BLU-554 in combination with OmniAb-derived CS1001.

CStone Pharmaceuticals also announced the completion of a $260 million
series B financing that will primarily fund clinical development of
OmniAb-derived CS1001.

MEI Pharma announced a poster presentation related to ME-344 at the
2018 ASCO Annual Meeting.

Roivant announced that OmniAb-derived RVT-1401 (previously HL161) will
form the foundation of a new company called Immunovant.

Nucorion Pharmaceuticals presented preclinical data for its novel
liver-targeting prodrug technology program, NCO-1010, for the
treatment of hepatitis B at the European Association for the Study of
the Liver’s International Liver Congress.

Business Development

Ligand announced receipt of a $47 million payment as a result of
signing an amendment related to its OmniAb platform license agreement
with WuXi Biologics. Under the amended agreement, Ligand will continue
to be eligible to earn royalties at the same rate and terms as the
previous agreement and the predefined contract payments have been
eliminated. With this new business relationship, WuXi Biologics
believes it will be able to increase the number of OmniAb antibodies
it discovers for its clients in China and around the world.

Ligand entered into a research and development agreement with Janssen
Pharmaceuticals for the development by Ligand of a heavy-chain-only
(HCO) version of OmniChicken, for which Ligand is eligible to earn
defined milestone payments. Upon completion of the project, Ligand
will be able to make the HCO OmniChicken available to other commercial
partners.

Ligand entered into OmniChicken license expansions with FivePrime and
Amgen, allowing the companies to use the OmniChicken technology.

Ligand entered into a Captisol use agreement with Sunshine Lake
Pharmaceuticals.

Internal Research and Development

Ligand presented a poster at the National Lipid Association's 2018
Scientific Sessions showing that Ligand’s LTP Technology significantly
improves liver targeting of the statin rosuvastatin (Crestor®),
and may potentially be an effective strategy to increase the
therapeutic index of statins and reduce statin intolerance.

A paper by Ligand scientists entitled “V(D)J Rearrangement is
Dispensable for Producing CDR-H3 Sequence Diversity in a Gene
Converting Species” was published in the journal Frontiers in
Immunology, highlighting the use of OmniChicken in antibody drug
discovery.

Recent Financing

Ligand announced the pricing of $750 million aggregate principal
amount (including overallotments) of 0.75% convertible senior notes
due 2023 with an initial conversion price of $248.48 per share. Ligand
also repurchased 260,000 shares in the transaction and entered into
convertible note hedge transactions with the net effect of increasing
the effective conversion price of the notes to $315.38 per share.
Ligand indicated the net proceeds of the offering will be used for
acquisitions, working capital and other general corporate purposes.

Adjusted Financial Measures

The Company reports adjusted net income and adjusted net income per
diluted share in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. The Company’s
financial measures under GAAP include stock-based compensation expense,
amortization of debt-related costs, amortization related to acquisitions
and intangible assets, changes in contingent liabilities, mark-to-market
adjustments for amounts relating to our equity investments in Viking and
Retrophin, unissued shares relating to the Senior Convertible Notes and
others that are listed in the itemized reconciliations between GAAP and
adjusted financial measures included at the end of this press release.
However, other than with respect to total revenue, the Company only
provides guidance on an adjusted basis and does not provide
reconciliations of such forward-looking adjusted measures to GAAP due to
the inherent difficulty in forecasting and quantifying certain amounts
that are necessary for such reconciliation, including adjustments that
could be made for changes in contingent liabilities, changes in the
market value of our investments in Viking and Retrophin, stock-based
compensation expense and effects of any discrete income tax items.
Management has excluded the effects of these items in its adjusted
measures to assist investors in analyzing and assessing the Company’s
past and future core operating performance. Additionally, adjusted
earnings per diluted share is a key component of the financial metrics
utilized by the Company’s board of directors to measure, in part,
management’s performance and determine significant elements of
management’s compensation.

Conference Call

Ligand management will host a conference call today beginning at 4:30
p.m. Eastern time (1:30 p.m. Pacific time) to discuss this announcement
and answer questions. To participate via telephone, please dial (833)
591-4752 from the U.S. or (720) 405-1612 from outside the U.S., using
the conference ID 9585138. To participate via live or replay webcast, a
link is available at www.ligand.com.

About Ligand Pharmaceuticals

Ligand is a biopharmaceutical company focused on developing or acquiring
technologies that help pharmaceutical companies discover and develop
medicines. Our business model creates value for stockholders by
providing a diversified portfolio of biotech and pharmaceutical product
revenue streams that are supported by an efficient and low corporate
cost structure. Our goal is to offer investors an opportunity to
participate in the promise of the biotech industry in a profitable,
diversified and lower-risk business than a typical biotech company. Our
business model is based on doing what we do best: drug discovery,
early-stage drug development, product reformulation and partnering. We
partner with other pharmaceutical companies to leverage what they do
best (late-stage development, regulatory affairs and commercialization)
to ultimately generate our revenue.

Ligand’s Captisol® platform technology is a patent-protected,
chemically modified cyclodextrin with a structure designed to optimize
the solubility and stability of drugs. OmniAb® is a
patent-protected transgenic animal platform used in the discovery of
fully human mono- and bispecific therapeutic antibodies. Ligand has
established multiple alliances, licenses and other business
relationships with the world's leading pharmaceutical companies
including Novartis, Amgen, Merck, Pfizer, Celgene, Gilead, Janssen,
Baxter International and Eli Lilly.

Follow Ligand on Twitter @Ligand_LGND.

Forward-Looking Statements

This news release contains forward-looking statements by Ligand that
involve risks and uncertainties and reflect Ligand's judgment as of the
date of this release. Words such as “plans,” “believes,” “expects,”
“anticipates,” and “will,” and similar expressions, are intended to
identify forward-looking statements. These forward-looking statements
include, without limitation, statements regarding: Ligand’s future
revenue, including the timing, mix and volume of Captisol orders, the
timing of the initiation or completion of preclinical studies and
clinical trials by Ligand and its partners, the timing of regulatory
filings with the FDA and other regulatory agencies, the timing of new
product launches by Ligand and its partners and the related royalties
Ligand expects to receive from its partners, and guidance regarding the
full-year 2018 financial results. Actual events or results may differ
from Ligand's expectations due to risks and uncertainties inherent in
Ligand’s business, including, without limitation: Ligand may not receive
expected revenue from royalties, Captisol material sales and license
fees and milestone revenue; Ligand and its partners may not be able to
timely or successfully advance any product(s) in its internal or
partnered pipeline; Ligand may not achieve its guidance for 2018 or any
portion thereof or beyond; Ligand's 2018 revenues may not be at the
levels as currently anticipated; Ligand may not be able to create future
revenues and cash flows by developing innovative therapeutics; results
of any clinical study may not be timely, favorable or confirmed by later
studies; products under development by Ligand or its partners may not
receive regulatory approval; there may not be a market for the
product(s) even if successfully developed and approved; Ligand's
partners may terminate any of its agreements or development or
commercialization of any of its products; Ligand may not generate
expected revenues under its existing license agreements and may
experience significant costs as the result of potential delays under its
supply agreements; Ligand and its partners may experience delays in the
commencement, enrollment, completion or analysis of clinical testing for
its product candidates, or significant issues regarding the adequacy of
its clinical trial designs or the execution of its clinical trials,
which could result in increased costs and delays, or limit Ligand's
ability to obtain regulatory approval; unexpected adverse side effects
or inadequate therapeutic efficacy of Ligand's product(s) could delay or
prevent regulatory approval or commercialization; Ligand may not be able
to successfully implement its strategic growth plan and continue the
development of its proprietary programs; and ongoing or future
litigation could expose Ligand to significant liabilities and have a
material adverse effect on the company. The failure to meet expectations
with respect to any of the foregoing matters may reduce Ligand's stock
price. Additional information concerning these and other risk factors
affecting Ligand can be found in prior press releases available at www.ligand.com
as well as in Ligand's public periodic filings with the Securities and
Exchange Commission available at www.sec.gov.
Ligand disclaims any intent or obligation to update these
forward-looking statements beyond the date of this release, including
the possibility of additional license fees and milestone revenues we may
receive. This caution is made under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.

Other Disclaimers and Trademarks

The information in this press release regarding certain third-party
products and programs, including Promacta, a Novartis product, and
Kyprolis, an Amgen product, comes from information publicly released by
the owners of such products and programs. Ligand is not responsible for,
and has no role in, the development of such products or programs.

(3) Mark to market adjustments relating to our equity investment
in Retrophin net of amounts due to a third party licensor,
absorbed losses from an investment accounted for under the equity
method, and excess tax expense from non-deductible derivative
expenses.

(4) Excess tax benefits from stock-based compensation are recorded
as a discrete item within the provision for income taxes on the
consolidated statement of income pursuant to ASU 2016-09, which was
previously recognized in additional paid-in capital on the
consolidated statement of stockholders' equity.